In Winnipeg, MB, Jackson and Hailey have been living in a rental home for more than three years. They liked this rental home so much; they asked the landlord if they could buy this house. The landlord agreed to sell the property for $300,000 to Jackson and Hailey. On August 1, 2015, the landlord as “seller” and the tenants as “buyer” signed the agreement (Offer to Purchase). They deposited $5000 with the agreement and the possession date was August 31, 2015. If Jackson and Hailey put 5% down, then they need $15,000 as a down payment PLUS 1.5% for the closing costs of the house – 1.5% of $300,000 would be $4,500. To buy this home, Jackson and Hailey need $15,000 + $4,500. Altogether, they need $19,500 to buy this home.

In the month of July 2015, the couple (the tenants – Jackson and Hailey) added a patio at the rental home and painted the whole house inside. The tenants spent $5,897.32 from their pocket for this renovation and patio project. On July 28, 2015, the landlord (the seller) gave them a cheque for $5,897.32.

They deposited this cheque in their savings account and were under the impression that they could use this $5,897.32 towards their 5% down or closing costs. No, they can’t use this amount since the landlord paid it for the work they did in that same home. Under the guidelines, the seller is not allowed to pay any money to the buyer for the sale of this property. Now Jackson and Hailey are short $5,897.32 to buy this home.

Jackson and Hailey should have gotten some advice from a mortgage professional at Dominion Lending Centres before they signed an agreement to buy this home.

The proper planning of a mortgage is pertinent before anybody signs any agreements – it helps the client and the real estate agent.

Courtesy of Gurcharan Singh, AMP – DLC Canadian Anderson Financial Mortgage Team